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And the e-bandwagon continues…

04/03/2010

Richemont recently announced that it would increase its current stake in Net-a-Porter.com to full ownership. There have been a few questions raised about brands being sold by a retailer fully owned by a competitors. I think such thoughts are nonsense, especially since Sephora (owned by LVMH) sells cosmetics and fragrances by a plethora of other competing firms. The recent acquisition by Richemont is mirrored by GSI’s purchase of Ruelala, an exclusive online discount retailer. The proliferation of these types of online discount store fronts is pretty genius. Luxury companies are looking for ways to distribute leftover inventory through channels that still preserve the brand. This is why companies like Ralph Lauren and J. Crew invest so many resources into their own outlet locations (there is nothing sadder than seeing a lone Tory Burch bag tossed on a shelf at Loehmann’s).

But caution needs to be taken over the next few years as companies continue to more accurately plan and decrease inventory. After such huge success, Gilt Groupe announced that it  received a huge cash infusion to help expand its operations. But one of the main reasons the company got so much business was because of the unexpected inventory excess produced by the recession. How will the company be able to keep up the scale of business required to stay profitable?

Net-a-Porter Screen, via WSJ.com

Halfhearted attempts by companies at this type of venture are easily spotted. E-bay has opened its own online discount retail front, and I can’t help but feel shopping via Fashion Vault would be like ordering a veggie burger at a McDonald’s located in Dallas.

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